Dell is Going Private with $2 Billion Loan from Microsoft

The recent talks of Dell going private turned out to be true after all with Dell entering into an agreement to be purchased back by Dell’s founder and CEO, Michael Dell in partnership with private equity firm Silver Lake and with assistance from Microsoft and other financing institutions.

The deal is valued at US$24.4 billion, which involves a US$2 billion loan from Microsoft, cash funded by investment funds related to Silver Lake, cash investment by MSD Capital,L.P., financing by BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital markets, Dell’s cash on hand (said to be about US$5 billion) and most importantly cash and equity contributed by Mr. Dell who own about 14% of Dell’s shares currently.

Earlier last month, we reported rumors of this new development amidst Dell’s less than optimistic outlook as the company lost a third of its value last year. According to Bloomberg’s earlier reports, Dell was said to have a market value of US$18.9 billion as of early last month. And according to the press release hosted at Engadget, the current valued transaction represents a notable premium over its trading and closing sharing price.

Just a couple of weeks ago, we caught wind of Microsoft’s interest to pump in up to US$3 billion to help Dell take the company private. While it’s not clear as to why Microsoft is so eager to finance this deal, Bloomberg’s earlier report also did make an interesting note from an analyst at Mizuho Securities USA that Mr.Dell "wants to de-emphasize about two-thirds of his business". With PC sales falling and Windows 8 not really helping much to drive further PC sales, it is anybody’s guess if Dell might consider overhauling the consumer PC business. Dell rose above the giants of the day two decades ago; with careful planning and constant vigilance to market needs, it could still reinvent itself.

On the other hand, Dell might cut back on the consumer market and further bolster its enterprise services and infrastructure offerings. In its place, might Microsoft take up its void to service consumer interests? While these are just our speculations, stay tuned for more updates over the following weeks as the story unfolds.